Online trade helps in economic growth
May 15, ; Accepted Date: May 22, ; Published Date: J Tourism Hospit 6: This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. This study investigates the panel Granger causality relationship approach and variance decomposition to test whether domestic economic growth promote tourists receipts, using international tourism receipts, real GDP per capita growth, exchange rate, financial development, and trade openness for Asian countries over the period of and whether regional effects should be considered a product of incomes groups in selected Asian countries.
Based on the findings of the Panel Granger tests and variance decomposition analysis, tourism receipts and economic growth should be considered in the analysis, since they provide valuable information for policymakers. The interpretation of the causality test can help providing a tool to allocate limited resources in addition to developing appropriate tourism online trade helps in economic growth.
Economic growth; Tourism receipts; Trade openness; Financial development; Asian countries. International tourism receipts in destinations around the world grew by 3.
Tourism is increasing overall economic activity, and this increase in activity is normally desirable. The attention has focused on international tourism as an important potential growth sector for many countries [ 3 ].
The speedy growth of tourism causes an increase in household income and government revenues through multiplier effects, improvements in the balance of payments and growth in the tourism promoted government policies. In recent decades, the relationship between tourism and economic growth for both developing and developed countries has been extensively studied. In general, there is the causal relationship from tourism to economic growth.
Tourism attracted relatively little attention in the academic literature on economic development until the twenty first century. First, Sinclair and Stabler [ 4 ] argued that the most obvious distinction between developed and developing economies is that, under existing conditional differences, a rapid injection of tourist expenditures into developing economies has a different and significant impact.
Some studies highlight that the potential of tourism on growth is based, to a large part, on its provision of foreign currency earnings and corresponding alleviation of the balance of payments constraint. It is considered that foreign exchange earnings from tourism can be used to import capital goods online trade helps in economic growth produce goods and services, which in turn leads to economic growth.
It is also considered that tourism can have other benefits for the economy such as tax revenue, employment creation additional sources of income.
In addition, international tourism may contribute to economic growth by enhancing efficiency through competition between local firms and corresponding businesses in other international tourist destinations and by facilitating the scale economies at a local level.
The influence of inbound tourism on national economies is becoming increasingly important because of the growing size of the tourist market. The TLGH is directly derived from widely known export-led growth hypothesis ELGH which suggests that economic growth online trade helps in economic growth promote not just by expanding human resources and technology inside of the economy, additionally by expanding foreign exchange earnings. Analogously to the trade openness, inbound tourism can stimulate economic growth in many ways.
For instance, first, tourism significantly contributes to foreign exchange reserves which help in bringing new technologies for production process [ 9 ]. Secondly, tourism stimulates investments in new infrastructure, human capital and increases competition [ 1011 ].
Thirdly, inbound tourism promotes industrial development through spillover effects [ 12 ]. Finally, tourism generates positive economic externalities [ 13 - 16 ].
Regarding other factors affecting economic growth, that financial development is also emerging as an important driver of economic growth [ 17 ]. Besides, Ridderstaat and Croes [ 18 ] established a link between money supply and tourism demand cycles. Indeed, the global tourism has been severely affected by the recent financial crisis [ 19 ]. From our foregoing discussion, it seems that there is a reasonable relationship between economic growth, tourism and trade openness.
In the case of Asian countries, Oh [ 20 ] argues that it is necessary to investigate the hypothesis in many destination countries for thepurpose of generalization. Tang and Jang [ 21 ] studied that the countries could differ in terms of the weight of tourism on their overall economies, the size and openness of the economy, Kim et al.
The tourism economy relationship could also differ from one country to another. This paper is organized as follows. Section 2 shows the review of the literature on tourism and economic Growth. Section 3 presents the data and the methods used in this study, Section 3 brings to light why test the panel unit root, the Cointegration approach, estimating the long-run and short-run PMG relationship t, Panel Granger Causality.
Section 4 explains the results. Finally, conclusions and policy implications presented in Section 5. Generally, these studies, which are noted online trade helps in economic growth Table 1analyse the economic elements behind the relationship between the two online trade helps in economic growth from different perspectives and with different methodological approaches.
If the results showed the opposite direction of causality, in turn, will result in the online trade helps in economic growth of the tourism industry. If there is neutrality causality relationship between tourism growth and economic development, then there is no feedback effect between each other. Finally, if the relationship is bidirectional, and tourism and economic growth have a reciprocal causal relationship, then a push in both areas would benefit both. Literature about the relationship between tourism and economic growth: In those countries, tourism receipts had a relative weight on the per capita income: For 25 countries, Algieri [ 26 ] studied high tourism growth with per capita income ratios.
The author concluded that the growth ratio of the tourism sector than the manufacturing sector only when the elasticity was less than 1. The tourism sector is, therefore, extremely sensitive to world macroeconomic circumstances. It is also highlighted the special influence of tourism on the increase of GDP in sub-Saharan countries.
In the same year, Sequeira and Nunes [ 28 ] examined the relationship between tourism and economic growth using two estimators that they considered to be complementary: Given these results, the authors suggested two interesting research lines. On the one hand, they explored the relationship between tourism and the traditional determinants of economic growth e.
Those authors also introduced other economic variables that represent traditional factors of economic growth. With the purpose of tackling the problem of heterogeneity in the sample, the authors used estimation methods based on both fixed and variable effects. In addition, they estimated the model using Arellano and Bond [ 30 ] with autocorrelation, something that allowed them to consider the endogenous nature of traditional growth variables by using instrumental variables.
The results were quite conclusive: Similarity, Narayan et al. Nevertheless, the authors pointed online trade helps in economic growth that there were certain factors limiting the effects of tourism on growth. Those factors were the heavy dependence on food imports, which represent an important break on the multiplying effect of the tourism sector, natural disasters, political online trade helps in economic growth and a deficit of public infrastructure.
The author postulated as to whether tourism could be considered a relevant regional-convergence factor. The regions were classified into three different categories: The results showed that in coastal and Mediterranean regions, both international and national tourism were important factors for economic regional convergence.
In contrast, in inland regions only national tourism was relevant. For countries, Holzner [ 33 ] empirically analyzed the danger of a beach disease Effect in tourism-dependent countries over the long-run over the period He first worked on the longrun relationship between tourism and economic growth in a crosscountry setting.
Empirical results were then checked in a panel data framework on GDP per capita levels that allows control for reverse causality, non-linearity and interactive effects. He found that there is no danger of a Beach Disease Effect. On the contrary, not only do tourism-dependent countries was not face real exchange rate distortion and de-industrialization, they also experience higher than average economic growth. Investment in physical capitalsuch as transport infrastructure, was complementary to investment in tourism.
The study found no evidence to support the tourism-led growth hypothesis for any group of countries. Seetanah [ 35 ] examined the TLG hypothesis in a set of nineteen islands and, he obtained at similar conclusions.
The author also showed that, the impact of tourism on growth in the islands is certainly greater. With the same perspective as for earlier studies, Apergis and Payne [ 36 ] examined the causal relationship between tourism and economic growth for a panel of nine Caribbean countries.
Online trade helps in economic growth panel error correction model used revealed bidirectional causality between tourism and growth. Dritsakis [ 37 ] analyzed whether the TLG hypothesis could be verified in seven Mediterranean countries possessing similar tourist features by also focusing on the relationship between tourism development and economic growth in various countries.
He applied a new heterogeneous panel cointegation technique to investigate long-run. The results showed that there is solid evidence of panel cointegration relationships between tourism development and GDP and that tourist receipts have a greater impact on GDP in all seven Mediterranean countries. Naryan, Sharma and Bannigidadmath [ 31 ] examined whether the number of visitors predict macroeconomic variables for panels, namely, Fiji, Solomon Islands, PNG, Vanuatu, Samoa and Tonga over the periods.
They propose a predictive model for panel regression with two variables where visitor online trade helps in economic growth are the predictor variable and macroeconomic variables are the dependent variables.
Motivated by a growing number of studies showing that tourism development has economy-wide effects influencing the macro-economy, and consider abroad range of macroeconomic variables. Recent empirical online trade helps in economic growth centers on the relationship between international online trade helps in economic growth and trade.
Their research online trade helps in economic growth if a common online trade helps in economic growth CC might increase income via international trade and tourism. The investigation analyzed the effects of CC on tourism and trade, followed by the effects of openness to trade and tourism on economic growth, and then the impact of CC on trade, tourism and income.
The sample includes data from countries divided into three groups according to income levels. Online trade helps in economic growth results showed that the CC has a considerable effect on both trade and tourism and that both variables may have effect on the level of income of the countries, especially on middle- and high-income economies. With the purpose of studying the relationship between tourism and growth in greater depth, some new studies have been published which contribute to the analysis of hypotheses through new methodological approaches or through the inclusion of new variables.
For countries, Adamou and Chlorides [ 39 ] contributed to this research area with new evidence when they allowed the relationship between tourism and economic growth to take a non-linear form. In this way, specialization in tourism was found to be associated with higher but diminishing economic growth rates. Therefore, high specialization reduces the contribution of tourism to economic growth was at least and tourism becomes an obstacle to growth. From that point of specialization onwards, it is better for countries to develop other activities.
Thus, tourism may generate economic growth in the first stages of specialization, but little by little its effects reduced. Mercedes Silva [ 40 ] investigated tourism contributes to economic growth.
From a sample of 11 studies based on panel data techniques published through toand for a total of 87 heterogeneous estimations, a meta-analysis was performed by applying models for both fixed and random effects, with the main objective being to calculate a summary measure of the effects of tourism on economic growth.
The results showed a positive elasticity online trade helps in economic growth economic growth and tourism, the magnitude of the effect was found to vary according to the methodological procedure employed in the original studies for empirical estimations.
Finally, Berda et al. However, the authors did not specify the format of the nonlinearity. The present researcher explored about the identity of these nonlinearities. The methodology combined the concepts of cointegration with the asymmetric adjustment thresholds. The results explained the nonlinearity in the case of Brazil that is modeled on the dynamics of the adjustment from transitory situations of disequilibrium between tourism and growth. It showed that an M-TAR adjustment mechanism is which best describes this behavior.
Markets are the context, both physical and conceptual, where exchange online trade helps in economic growth place. Marketing includes all activities from the producer to the final including processing and distribution systems. The term producer includes farmers or pastoralists and the manufacturers of production inputs when they produce the commodity being marketed. The term consumer is used for anyone who is the final consumer of a product or the final user of a production input e.
The retailer is the final link in the chain from producer to consumer. Hence, an urban butcher is a retailer and so is a vaccinator in the government veterinary services who delivers a vaccination.
The wholesaler delivers the product to the retailer. The term farm gate is the location of a sale where a farmer keeps his or her animals or produces his or her crop i. The terms market actors and market agents are used interchangeably to represent any persons participating at any level of the market.
The objectives of marketing vary. For the individual producer or consumer, the objectives may be to maximise benefits from the resources available and to expand marketing operations in order to increase wealth. From a societal viewpoint, the objectives may be to encourage efficient allocation of resources, to create wealth and promote economic growth in order to improve the general welfare of society. Important considerations may also be to improve distribution of income between sectors of the economy and to maintain some stability of supply and demand for marketed goods.
The concurrence of marketing objectives online trade helps in economic growth national policy objectives identified in module 2 will be discussed later in this module. Producers usually carry out some or all of the marketing steps. Often, because producers are also consumers, little of what is produced is marketed. Livestock owners may be only marginally market-oriented. Because of traditional attitudes towards wealth in cattle, owners may choose to hold cattle rather than market them.
Producers are likely to be some distance away from consumers. They may also be online trade helps in economic growth dispersed. Both conditions affect the nature of the marketing and distribution process. Agricultural, and particularly livestock products, are generally seasonal in supply and are more susceptible to natural shocks.
In Africa, the marketing of online trade helps in economic growth products typically suffers from limited institutional support. The major roles of marketing and trade in the national economy can be thought of in terms of: Specialisation in activities of comparative advantage Without market facilities, areas must maintain diversified activities to produce their own food, shelter, tools and other needed goods.
In the presence of a market, however, an individual can specialise in one activity online trade helps in economic growth sell the surplus in order to purchase other needed goods. The individual is likely to specialise on the basis of a comparative advantage in that activity for which he or she has some special resource or ability. A comparative advantage exists when an individual or region can produce a good, relative to the price of other goods, more cheaply than another individual or region.
In livestock production, comparative advantage is often the result of agro-ecological conditions particular to a region making it suited to certain specialised activities. The agro-ecological basis for production results in regional comparative advantage, whereby all of an area with that common agro-ecological base shares the ability to produce the good relatively more cheaply than another area.
Production possibilities of beef and mutton for Countries A and B. The two countries have an equal amount of productive land. Country A, however, has more favourable agro-ecological conditions than B for both mutton and beef.
The trade-offs for the two countries can be expressed as: Thus, country A has an absolute advantage for both beef and mutton over country B. Therefore, Country B has a comparative advantage in the production of mutton and Country A has a comparative advantage in the production of beef.
The important point is that both countries would benefit if they could trade with each other in the item for which each has a comparative advantage. Production possibilities with and without specialisation of online trade helps in economic growth for Countries A and B. If online trade helps in economic growth look at the total production of beef and mutton in the two countries, we find four possible situations: Total production ' t a. Both countries will, however, end up with more of one good than they need and none of the other.
So, for the benefits from comparative advantage to be realised, trade must occur. Figure 1 illustrates that the largest production results at point C, where both countries specialise and trade for one product online trade helps in economic growth. Specialised activities lead to trade. The gains from online trade helps in economic growth will be the value of additional production made possible through specialisation and trade. Online trade helps in economic growth exact gains from trade will depend on the market prices of the goods with and without trade.
This concept applies equally to individuals, who use their comparative advantage to specialise in one task, selling their products to trade for the other goods they need. Comparative advantage estimated time required: The table below provides production alternatives for countries C and D in milk and beef production. What are the trade-off ratios between milk and beef for countries C and D? Where do absolute and comparative advantages exist for milk and beef?
Use your results to discuss the type of trading scenario which would be to the advantage of both countries. Draw a graph, as in Figure 5. Enhanced resource use efficiency and trade Through specialisation and trade, a community is better able to utilise its limited resources.
Specialisation and the resulting efficiency of resource-use is the basis for economic growth and development. As markets and economies develop, surpluses occur more frequently in profitable activities, creating new wealth, while products are moved greater distances than before. Thus, trade is a necessary ingredient for economic growth. Marketing is simply the means by which trade occurs. Advances in marketing with economic growth As economic growth proceeds, several changes in marketing take place.
With economic development, the activities and tasks of marketing increase. Activities such as storage and processing, packaging and retail distribution become more important. Greater activity moves away from the site of production and towards marketing.
This, in turn, creates employment opportunities and further specialisation diversification of the community. Since livestock products typically have positive income elasticities of demand, economic growth can lead directly to new opportunities for production. Thus, the livestock subsector increases in importance.
With development, more economic agents may enter trade, helping to improve marketing services and, in some cases, allowing the market to capture external economies of scale. This refers to a situation where the presence of many agents allows each one to operate at a lower cost. An example is the case where increased trade in some commodity e. The physical infrastructure can also be affected in a positive way by large markets, in the form of better roads and communication, offering the potential for external economies of scale.
Discuss the differences between external and internal economies of scale. For example, discuss external economies with respect to milk production density. With the shift in resources away from production to marketing services, small-scale processing can expand markets by increasing demand through diversification online trade helps in economic growth the end products.
Perhaps most important, and crucial to the reform of African marketing systems, is the requirement that the institutional and policy environments do not discourage or unnecessarily impede the actions of marketers.
As well, property rights and contracts should be protected. Another important factor in the development of markets is the disequilibrium between demand and supply. Producers and consumers then must exert greater efforts to cope with each others' requirements. Increased efficiency resulting from trade is not in itself sufficient to create wealth. A stable but static equilibrium, where supply meets demand, may no longer produce new wealth. Disequilibrium, along with technical and institutional changes, may be the conditions needed to move to even greater comparative advantage and efficiency levels.
Further, initial scarcity of resources poverty trap can cause subsistence activities to dominate, denying the surplus labour or resources necessary to invest in new knowledge or technology required to create comparative advantage. The institutional and organisational requirements necessary to expand markets may also be enormous. The role of property rights will play an important role, as marketing inherently involves transferring property rights.
The nature of the society may restrict the scale on which such transfers can take place. In this very simplistic example, countries A and B produce both beef and mutton. The trade-offs for the two countries can be expressed as:. Note that country A can produce more of either beef or mutton than country B. If we look at the total production of beef and mutton in the two countries, we find four possible situations:.
The largest amount of production results from each country specialising in the product for which it has a comparative advantage.